Enhanced annuity sales eclipse the £4 billion barrier

LONDON, 18 February 2013 – UK enhanced annuity sales rose to £4.48 billion in 2012, an increase of 49 per cent over 2011, according to research by Towers Watson. Second half sales in 2012 were £2.49 billion. Sales in October to December were a quarterly record at £1.32 billion.

Mike Williams, a leader in the Insurance Management Consultancy team at Towers Watson, said: "2012 sales approaching £4.5 billion is yet another landmark in the enhanced annuity market. Over 85,000 consumers benefited from higher pension incomes because their medical condition or lifestyle has been assessed and a lower than average expectation of life anticipated. “

Consumer interest in taking out enhanced annuities, which provide bigger pensions for those with serious medical conditions or with negative lifestyle factors such as those linked to weight, smoking and occupation, is set to continue given the potential to reach an even wider cross-section of the population.

Mike Williams noted: “Despite the latest record level of sales by volume, enhanced annuities are still only around 20% of the total annuity policies sold. The current range of medical conditions and lifestyle factors that can lead to enhancements suggests a greater proportion of retiring consumers could benefit.”

He added: “And looking ahead, the impact of the Financial Services Authority thematic review of annuities looks set to provide further support for the use of individualised underwriting based on health and lifestyle related factors to enable retirees to make the most of whatever pensions savings they have.”

Trends in enhanced annuity sales

Year

Sales (millions)

2001

£419.6

2002

£651.2

2003

£698.6

2004

£593.4

2005

£638.7

2006

£815.9

2007

£1,095.1

2008

£1,444.6

2009

£1,785.6

2010

£2,468.1

2011

£3,019.4

2012

£4,484.8

Notes to editors

Enhanced or impaired life annuities were first introduced in the UK in 1995 and have rapidly gained a substantial market share of all annuities sold. They include: annuities enhanced for serious medical conditions; annuities for smokers; and annuities enhanced as a result of lifestyle factors such as weight or occupation. The survey covered nine providers of enhanced annuities: Aviva, Canada Life, Just Retirement, Legal & General, LV=, MGM Advantage, Partnership, Prudential and Reliance Mutual.

About Towers Watson

Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organisations improve performance through effective people, risk and financial management. The company offers solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at www.towerswatson.com